How to Stay Ahead Financially in Hard Times
The last two years have taught most of us that anything can happen, and our financial situation can be made incredibly vulnerable by the unexpected.
As such, it’s key to know how to maintain your financial situation even in difficult times, whether this is because of a pandemic, a company closing down, you’ve lost your job, or you’ve had to deal with a significant unexpected financial event.
With this in mind, here are eight ways you can stay ahead financially, even in the hard times.
Get a bird’s eye view of your financial situation.
If you’re expecting to experience a financially difficult period, the best thing you can do to prepare is to look at your monthly incoming and outgoings.
You can check how much of your income can be used discretionarily after detracting your essential living costs – including utilities, rent, mortgage payments, etc. It gives you an idea of where you can cut corners and a basis for forming a budget.
Eliminate some unnecessary bills.
Perhaps unbeknown to you, there may be a few bills you’re paying each month that you don’t even use, which you’ll be more likely to pick up on after scanning your banking transactions.
You might be paying for some subscription services that you never use – or may even have forgotten you bought – including gym memberships, streaming services, Amazon Prime, etc.
Moreover, many still pay for cable TV, despite using streaming platforms such as Netflix for 90% of their viewing needs. At least, while things are a little difficult financially, it might be best to cut out some of these recurring, non-essential costs.
Reduce the cost of bills.
This may sound easier said than done. However, there are multiple ways to reduce the cost of your bills.
On the one hand, simply being more mindful of your water and energy consumption can help to reduce the cost of your bills each month.
However, making an effort to change providers – whether that’s for electricity, water, your insurance policies or your phone provider– can save you hundreds every month, particularly since prices tend to be better for new customers than for those who’ve had a plan with the same provider for years.
Save however much – or little – you’re able to.
In financially challenging times, money can be tight. However, it should still be a top priority to save even a little each month.
Having a sum set aside means that you can dip into it should unexpected financial events arise, preventing you from overusing your credit card or taking out a loan, which will cost you more in the long run.
Increase your income.
Aside from asking your employer for a raise – or working more hours – to increase your income at your main job, it’s always good to have more than one source of income so that you’re not financially reliant on just one source.
So, if you have a hobby, you can turn into a side hustle, professional knowledge that you could turn into an online course, or a load of your belongings you could sell. These can all help to increase your financial stability during difficult times.
Safeguard your credit.
Something that is significantly at risk during times of financial difficulty is your credit score, as this is when you’re most likely to miss payments on your bills.
Suppose you don’t have savings you can dip into. In that case, it’s usually better to use your credit card to ensure you make your payments on time, as late or missed payments are the most detrimental factor to your credit score, preventing you from borrowing money in the future.
Prioritise paying off high-interest debt.
The last thing you want to be dealing with in times of financial uncertainty is high-interest debt, as the interest will quickly accumulate to make the sum you owe inordinately more than you ever borrowed.
So, suppose you have any disposable income during financially tricky times. In that case, this is where you should be directing it first, so you can sacrifice as little of your capital as possible to pay back your debt in the long run and look forward to a time soon when you no longer need to factor that debt into your budget.
Consider a no-spend month (or even year).
Aside from the essential living expenses such as rent, utilities, groceries and debt repayments, consider committing to a month (or more) where you don’t spend money on anything non-essential.
You’d be surprised by how much of your income goes on stuff that you don’t need, and at the end of the month, you’ll have a significant sum that you can put towards your savings or repaying debt early.